Background on the Case
A federal US judge confirmed an initial offer of $3.7 billion from Red Tree Investments, a subsidiary of Contrarian Funds, in an auction of shares of the parent company of Venezolana de Industrias Petrolíferas (Citgo) Petroleum to pay creditors and bondholders, according to a court document.
Key Players Involved
- Red Tree Investments: A subsidiary of Contrarian Funds, which presented the initial offer.
- Gold Reserve: A mining company leading a consortium of creditors that presented an alternative offer of $7.1 billion.
- Elliott Investment Management: A hedge fund that previously offered $7.3 billion in a round of bidding last year.
- Venezuela: Represented by lawyers in the case, which has been ongoing for eight years in a Delaware court.
Judge’s Decision and Implications
Judge Leonard Stark recommended Red Tree’s offer as it strikes the best balance between evaluation criteria, primarily focusing on price and certainty of closure. The judge overruled objections from Gold Reserve, other creditors, and Venezuela’s legal representatives.
Stark instructed Robert Pincus, the court-appointed official overseeing the auction, to propose a deadline for receiving competing offers to Red Tree’s. This is expected to lead to the selection of the winning auction offer, with a final hearing scheduled for July.
The judge prioritized price over certainty of closure in Pincus’s final recommendation.
Previous Auction and Expected Impact
In a previous round of bidding last year, most creditors rejected an offer of $7.3 billion from Elliott Investment Management.
The confirmation of Red Tree’s initial offer is anticipated to encourage new payment proposals worth up to $3.0 billion for holders of PDVSA 2020 bonds, backed by Citgo shares.
Key Questions and Answers
- Who is Red Tree Investments? Red Tree Investments is a subsidiary of Contrarian Funds, which submitted the initial $3.7 billion offer in the Citgo parent company auction.
- What is the significance of this case? This case has been ongoing for eight years in a Delaware court, involving creditors seeking compensation from Citgo’s income. The dispute centers around which offer best balances price and certainty of closure.
- What was the previous highest offer? The highest previous offer came from Elliott Investment Management, a hedge fund, with $7.3 billion in a round of bidding last year.
- How will this decision impact bondholders? The confirmation of Red Tree’s initial offer is expected to incentivize new payment proposals worth up to $3.0 billion for holders of PDVSA 2020 bonds, backed by Citgo shares.
